Market Analysis

The major U.S. index futures are pointing to a lower opening on Monday, with sentiment remaining cautious as the markets await a key manufacturing report based on the Institute for Supply Management’s national survey. Earlier in the day, two separate surveys relayed mixed messages about China’s manufacturing sector. Meanwhile, Eurostat reported that eurozone’s unemployment rate rose to a record high. Some of these lackluster data points are likely to stir growth concerns even as they await a raft of market moving economic numbers over the course of the week.

U.S. stocks advanced amid volatility during the week ended March 30th, as traders reacted to mixed data and stayed hopeful of a lasting solution to the eurozone’s debt woes.

Last Monday, the major averages advanced solidly despite the release of a report showing an unexpected drop in pending home sales. The optimism followed an upgraded economic assessment provided by Federal Reserve Chairman Ben Bernanke. The major averages reversed course and declined modestly on Tuesday, dragged lower by a lackluster house price report and another report showing an unexpected drop in consumer confidence.

Stung by a mixed durable goods orders report, the indexes declined moderately on Wednesday. Stocks turned mixed on Thursday in the wake of another batch of mixed economic readings. The major averages closed mixed yet again on Friday amid the release of a trio of economic reports. A Commerce Department report showed strong personal spending growth but anemic income growth, while a regional survey showed that manufacturing conditions continued to expand, albeit at a slower rate, and a consumer confidence reading came in better than expected.

Oil pulled back by close to $2-a-barrel on Wednesday in reaction to a bearish inventory report, which showed a build in crude oil stockpiles. Economic data did not support the cause of oil either. The commodity fell by over $2.50-a-barrel on Thursday before paring back some of those losses on Friday on the back of the positive domestic economic data.

Gold futures, which rose $9.50 or 0.57 percent to $1,671.90 an ounce, in the previous week, are currently sliding $2.50 to $1,669.40 an ounce. The precious metal rose solidly last Friday following three straight sessions of losses, ending the week modestly higher.

Among currencies, the dollar extended its weakness against the euro, falling 0.56 percent before settling the week ended March 30th at $1.334. Meanwhile, the dollar added 0.63 percent against the yen to 82.87 yen. Last week, the euro rode on the back of expectations of the eurozone ministers agreeing to boost the firewall. Additionally, some lackluster U.S. economic data exerted downward pressure on the buck, pushing the euro higher.

The yen was firmer for most of last week, as exporters sold dollars for repatriating their overseas profits. However, Friday’s strong U.S. economic data dragged the Japanese unit lower to give an upper hand to the dollar.

The U.S. dollar is currently trading at 82.57 yen and is valued at $1.3321 versus the euro.

Asia

The major Asian markets ended mixed after two separate surveys relayed two different messages concerning the manufacturing sector of the Chinese economy. Meanwhile, the Chinese market was closed for a 3-day public holiday beginning today.

Official data showed that China’s manufacturing sector expanded, with the corresponding purchasing managers’ index rising 2.1 points to 53.1. Meanwhile, the final reading based on the HSBC purchasing managers’ survey suggested a contraction.

After opening notably higher, Japan’s Nikkei 225 average gradually gave back its gains over the course of the session but still closed up 26.31 points or 0.26 percent at 10,110. Export stocks received some support from the weakness of the yen, which pulled back after the release of the Bank of Japan’s Tankan survey.

The survey showed that confidence among Japanese manufacturers remained unchanged at –4 in the March quarter, while economists had expected it to improve to –1.

Meanwhile, Australia’s All Ordinaries ended down 3.60 points or 0.08 percent at 4,416, as most sectors, with the exception of material and energy stocks, declined. Hong Kong’s Hang Seng Index closed at 20,522, down 33.32 points or 0.16 percent.

Europe

European stocks are trading mixed after rebounding last Friday. The final reading of Markit’s survey showed that contraction by the eurozone’s manufacturing sector was confirmed, with the purchasing managers’ index unrevised at 47.7 in March. Meanwhile, the U.K. manufacturing purchasing managers’ index rose 0.6 points to 52.1 in March.

A separate report released by Eurostat showed that the unemployment rate rose to a record high of 10.8 percent.

Employment and manufacturing readings are likely to take center stage in the unfolding week, as economic anxiety has returned following the most recent data points, which have raised questions about the strength of the recovery. Traders may closely watch the March non-farm payrolls report to be released on Friday, ADP’s private sector employment report, the weekly jobless claims report and the results of the Institute for Supply Management’s manufacturing and service sector reports.

The FOMC minutes, some Fed speeches, the Federal Reserve’s consumer credit report for January and monthly auto sales may also create some ripples in the market. The Commerce Department’s construction spending report for February, the factory goods orders report and announcements concerning Treasury auctions of 3-year and 10-year notes and 30-year bonds round up the economic events of the week.

Employment growth may have continued in March, although the pace of job additions could have slowed down. The government sector is expected to continue slashing jobs, while the warm weather may have led to a healthy addition of construction jobs.

The results of the Institute for Supply Management’s manufacturing survey, which are based on data compiled from purchasing and supply executives nationwide, are due out at 10 am ET. Economists expect the index to show a reading of 53 for March.

Manufacturing activity continued to expand in February, although at a slower pace. The headline manufacturing purchasing managers' index fell by 1.7 points to 52.4. The new orders index fell 1.7 points to 54.9 and the production index edged down 0.4 points to 55.3. The employment index was down about a point at 53.2.

The Commerce Department's construction spending report to be released at 10 am ET is expected to show a 0.7 percent increase in February.

Construction spending fell 0.1 percent month-over-month in January following a 1.4 percent increase in December. Spending on private construction remained unchanged compared to a 0.2 percent drop in spending on public construction. In the private construction category, weakness in the lodging, office, commercial and transportation categories was offset by strength in residential construction.

The St. Louis Federal Reserve Bank will release the March 28 remarks of President James Bullard to a monetary policy conference at Tsinghua University in Beijing that was closed to the press at 10 am ET. Cleveland Federal Reserve Bank President Sandra Pianalto is scheduled to speak to the Economic Roundtable of the Ohio Valley and will take questions from the audience in Marietta Ohio, at 12:35 pm ET.

Stocks in Focus

Ericsson (ERIC) said it has completed its earlier announced acquisition of carrier-grade Wi-Fi company BelAir Networks.

Teva (TEVA) announced that it has commenced the commercial launch of its generic versions of Sanofi’s (SNY) blood pressure treatments, Avapro and Avalide tablets. Teva has got a 180-day period of marketing exclusivity due to the privilege of being the first to file ANDAs for both these products.

Curtiss-Wright (CW) said it has completed the sale of its heat treating business to Bodycote for $52 million in cash. Curtiss-Wright also said it the sale has resulted in a book gain of $18 million, net of tax, or about 37 cents per share in the first quarter.

Medtronic (MDT) announced that it has reached an agreement to settle a previously disclosed federal securities class action. The agreement calls for Medtronic to make a payment of $85 million to resolve all the class claims.

Analog Devices (ADI) announced the acquisition of clocking technology company Multigig in a cash transaction.

Groupon (GRPN) announced a revision to its previously published fourth quarter and full year results related to an increase to its refund reserve accrual. The revision has led to a $14.3 million reduction to its revenues and a 4 cents per share decrease to its earnings per share. Meanwhile, the company confirmed its first quarter guidance, which calls for revenues of $510 million to $550 million and income from operations of $15 million to $35 million. Analysts estimate revenues of $533.79 million.